Repeal Michigan’s Pension Tax?

First a little information on pensions and taxation in Michigan. Before the law was passed in 2011, public pensions in Michigan were untaxed and private pension income up to $90,240 was also exempt from Michigan’s state income tax. The law House Bill 4361, did not tax pensions for those born before 1946, it also decreased exemptions for those born between 1946 and 1952, and then the big change, the law subjected the pensions of everybody born after 1952 to full taxation as income. The law became effective on January 1, 2012.

The thought was why should people who receive pensions be exempt from the Michigan state income tax and the 90 something percent of us who do not have pensions but possibly 401k’s or 403B’s have to pay Michigan state income tax on our retirement funds. Is that not a fair question to ask?

Well as you might have expected many people, well those who are lucky enough to have pensions did not like this law, and in fact hated the law. One of their points against it was they were planning their retirement based on the fact that they did not expect to pay Michigan state income tax on their pensions. I certainly understand that and feel for them but that was never codified in Michigan’s consitution. The fact that you believed politicians is not our fault but your own.

Well State Senator Rick Jones, R-Grand Ledge, and State Representative Tom Barrett, R-Pottersville, have introduced SB 41 and HB 4052, respectively. Their bills would essentially reverse the changes codified into law in 2011.

The question really comes down to who should have to pay Michigan state income taxes and who should not.

Should all of us who are not fortunate enough to have a pension but do contribute to 401K’s or 403B’s pay the Michigan state income tax?

And:

Should those who are fortunate enough to have a pension in Michigan not have to pay the Michigan state income tax?